A Study on Talent Retention Practices: Fostering Employee Retention

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1 Volume 7, Issue 9, March 2015 A Study on Talent Retention Practices: Fostering Employee Retention Dr. Yogita Mandhanya Abstract Lecturer Human Resources Shri Vaishnav Institute of Management Sch No. 71, Gumasta Nagar, Indore (M.P.) How to retain employees is one of the biggest problem that plague companies in the competitive marketplace. Not too long ago, companies accepted the "revolving door policy" as part of doing business and were quick to fill a vacant job with another eager candidate. Nowadays, businesses often find that they spend considerable time, effort, and money to train an employee only to have them develop into a valuable commodity and leave the company for greener pastures. Fast moving markets require fast-moving organizations that are continually refreshed with new talent. But no one likes to see talent leave; when a good employee walks, the business takes a hit. The solution is attractive, effective, compatible talent retention practices. The study was conducted primarily to evaluate the current human resource retention practices of companies in automobile sector. The research identified the core elements of human resource practices, which strongly influence the decision of employees to retain in the organization. The results indicate recruitment and selection, training and development, compensation packages, working environment, recognition and rewards and leadership are significantly related with employee retention policies practiced by the organization. Keywords: Talent Retention, Employee, human resource retention practices. Background of the study In today's competitive knowledgebase environment, human capital is considered to be one of the key resources for the overall success of the business. Each and every dynamic venture continuously, therefore, strives to get and retain the best talented employees for its organization In order to create a successful company, employers should consider as many options as possible when it comes to retaining employees, while at the same time securing their trust and loyalty so they have less of a desire to leave in the future. Hiring good people is tough, but keeping them can be even tougher. Open competition for other companies' people, once a rarity in business, is now an accepted fact. 40

2 6. Leadership Introduction It is a major challenge for organizations to retain skilled employees once they have been hired and trained. In addition to reasons like lack of growth opportunities, low pay packages and inability to adapt to the organization, high turnover has also been identified as a cause for low retention. The ease with which employees can now change jobs, move and change functions and industries, has reduced employees' loyalty towards organizations. The corresponding costs to the firm with regard to employees' quitting the organization and the subsequent hiring or replacement of employees can be quite significant in terms of personal, work-unit, and organizational readjustments. According to Get Les Mckeown's ( ) in his book named 'Retaining Top Employees', published in HBR series has defined employee retention as: Recruitment & Selection: It is the beginning of Retention program. An efficient and loyal employee selected will stay for long but a wrong decision will prove a selection error. The thorough recruit process along with an efficient selection program may avoid errors in future. Training and development: employees should be trained and given chance to improve and enhance their skills. Many employers fear that if the employees are well rained, they'll leave the organisation for better jobs. Organisation should not limit the resources on which org success depends. These trainings can be given to imp-rove many skills like; communication and technical, in-house processes and procedures improvement related skills, customer satisfaction related skills, special project related skills etc. The need for such trainings can be recognized from individual performance reviews, individual meetings, employee satisfaction surveys and by being in constant touch with the employees. Compensation: It constitutes the largest part of the employee retention process. Employees always have high expectations regarding their compensation packages. Compensation packages vary from industry to industry. So an attractive compensation package plays a critical role in retaining the employees. Compensation includes various aspects like salary and wages, bonuses, benefits, prerequisites, stock options, bonuses, vacations etc. setting up of a package must be done very effectively and efficiently. Organization Environment: It is not about managing retention. It is about managing people. If an organisation manages people well, employee retention will take care of itself. Organisation should focus on managing working environment to make better use of the available human assets. People want to work for an org which provides appreciation for the work done, ample opportunities to grow, a friendly and cooperative environment, a feeling of belongingness and commitment and that the org is second home to the employee. Environment includes culture, values, company reputation, quality of people in the org, employee development, career growth, risk taking, leading technologies, trust etc. An employee needs in an org learning environment which includes continuous learning and improvement of the individual, certifications and provision for higher studies etc. support environment which can provide support in the form of work-life balance. Work life balance includes flexible hours, telecommuting, dependent care, A systematic effort by employers to create and foster an environment that encourages current employees to remain employed by having policies and practices in place that address their diverse needs. Fostering long lasting relationships with employees begins with right recruitment practices and ends with effective retention tools adopted by an organization. Employee retention is a process in which the management with a definite understanding of the importance of employees devises a plan of action to encourage the staff to remain with the organization for a long period of time. Intelligent employers always realize the importance of retaining the best talent. Retaining talent has never been so important in the Indian scenario; however, things have changed in recent years, given a chance employees are prone to move from one organization to another. Corporate are facing the problem of employee retention at this time of economic revival. Greer, R Charles (2008) comments that company invest in their workforces when they pursue practices and develop programs that increase retention. By failing to make such investments, they incur the high cost of turnover. Accordingly there are sound practices that employees can follow in order to retain their employees. Organizations should have a proactive retention strategy which helps in reducing employee turnover. Retention must be part of the organization's DNA. Employee retention involves five major factors which should constitute in their strategies in the form of Talent Retention Practices:1. Recruitment & Selection 2. Training and development 3. Compensation 4. Recognition & rewards 5. Working Environment 41

3 Volume 7, Issue 9, March 2015 alternate work schedules, vacations, wellness, medical etc Work environment includes efficient manager, supportive co-workers, challenging work, involvement in decision-making, clarity of work and responsibilities and recognition. Lack or absence of such environment pushes employees to look for new opportunities. The environment should be such that the employees' feels connected to the organization in every respect. Leadership: - A manager plays the role of a mentor and a coach. He designs and plans work. He is a link and should maintain good relations. Promote team work, not only among teams but in different departments as well. This will induce competition as well as improve the relationships among colleagues. An employee should be recruited if there is a proper place and duties for him to perform. Otherwise he'll feel useless and will be dissatisfied Try to make the current employees stay instead of recruiting new ones. Support: Lack of support from management can sometimes serve as a reason for employee retention. Employers can also provide valuable feedback to employees and make them feel valued to the org. employees can also be supported in their personal crisis by providing personal loans during emergencies, child care services, employee assistance programs, counseling service, etc. employers can also support their employees by creating an environment of trust and inculcating the organizational values into employees. Thus employers can support their employees in a number of ways by providing feedback, by giving recognition and rewards, by counseling them and by providing emotional support. engaged in their organizational context. Importantly, the results go some considerable way toward explaining the influence that empowering leadership may have on important outcome variables such as affective commitment and turnover intentions. Priyanka Rawal (2011) concluded that despite increased globalization and fluctuating economic times of jobs, most employers are now struggling hard to keep good workers who are expecting more from their management and can willingly shift if their needs are not met. If an organization succeeds in managing its people well, employee retention will take care of itself. She further in her paper introduces that focus on managing the work environment so as to effectively utilize the available human assets is the need of the hour. Organizations should create an environment that fosters ample growth opportunities, appreciation for work accomplished and a friendly co-operative atmosphere that makes an employee feel connected and retains him in the organization. Thus working environment is one of the major factor comprising of autonomy, recognition, appreciation, authority, friendly relationship, facilities, flexible working hours etc favoring retention of employees which should be included in the retention practices of a firm. According to Arjit Bose (2011), exit interviews are recognized in many companies nowadays and are used as a valuable tool for increasing employee retention. Employee turnover is a serious concern and through exit interview reasons can be analyzed for why employees leave any organization. These reasons can be further taken care off for increasing retention of employees. There are different types of employees working in a company with varying behaviors. These diversities lead to different needs and when not satisfied lead to turnover and problems in retention. Thus by having a discussion in the form of exit interviews one can take care of the problems that are reducing retention of employees. Also V V Ramani and Usha Raghunandan(2008) in their article 'Managing Attrition Level in Organization' concluded that, an Exit interview conducted with a right attitude towards ascertaining the true cause of an employee's voluntary exit would definitely help the management in taking corrective measures to avoid such exits in future. Paul Michelman (2011) in his paper 'Why Retention Should Become a Core Strategy Now' concludes by suggesting the companies to build a culture of retention. For all the myriad approaches companies take to promote loyalty among their employees, one universal truth is that employees are more likely to stick it out in tough times when they feel that they are treated with Literature Review 42 Albrecht & Andreetta (2011) extended previous research findings by pointing toward a comprehensive understanding of how empowering leadership, empowerment and engagement inter-relate to influence affective commitment and turnover intentions among employees. The results indicate that when employees perceive that their leaders and managers have an empowering style of leadership they will feel empowered. Such feelings of empowerment lead employees to feel motivated and engaged and also lead to feelings of connection and belongingness to their organization. Furthermore, when employees experience such affective commitment they will be less inclined to entertain thoughts of leaving the organization. Findings further suggest that empowering leadership, empowerment and engagement provide the enabling conditions for employees to experience affective commitment and the propensity to stay

4 Managers don't need special training to job sculpt, but they do need to listen more carefully when employees describe what they like and dislike about their jobs. Once managers and employees have discussed deeply embedded life interests ideally, during employee performance reviews they can work together to customize future work assignments which will enhance employee morale and productivity leading to retention of employees. (job sculpting i.e. right match right person to right job) integrity. According to him many workers prefer to stay with their current employer if their manager presents them with opportunities to grow, develop their skills, and position themselves to move forward in their careers. Thus interpersonal relations with the boss and his leadership skills will be an effective practice in increasing retention of employees. On the part of the leader he has to provide opportunities to his subordinates and learn as much as he can about his employees. Kirti Naik (2011) in his paper 'Philosophy of Motivation: A Strategy to Retain Manpower', has focused on the aspect that those organizations, that care for long term relationship with the employees and consider them as partners, in progress will certainly work out ways and means to create a heaven, where apart from money the employees get lovable and caring fraternity, time to satisfy their individual needs and aspirations and recognition for performance. Thus a participative style of leadership and a participative environment fosters loyalty and commitment among the employees which retain them in the company. Such an environment boosts up the morale and satisfies psychological needs of the employees increasing employee retention.. M D Verma & Sujata Nagaraj (2011) discussed that an organization that makes adequate provision for its employee's personal growth thereby enabling them to move further up in the organizational hierarchy can be rest assured of long term commitment from its employees. He also focused on the issue that work life balance is a successful tool for managing & retaining talent; through work life balance practices. As WLB contributes towards flexible working arrangements it helps in reducing absenteeism. It reduces stress and builds productivity. There is improved morale, job satisfaction, motivation and commitment. It enhances positive attitude. Coaching and mentoring aid in creating a better retention culture, various stress management techniques can be taught through a well developed training program. These various strategies will help to manage the diverse culture leading to loyalty commitment and retention. Timothy Butler and James Waldroop (1999) in their paper Job Sculpting; The art of Retaining your Best People printed in HBR series of books ( ) highlighted that only if their jobs fit their deeply embedded life interests that is, their long-held, emotionally driven passions, employees will retain for a longer period of time. They introduced the concept of job sculpting, the art of matching people to jobs that resonate with the activities that make them truly happy. Porter (2001) in his study explained that in today's competitive knowledgebase environment, human capital is considered to be one of the key resources for the overall success of the business. Each and every dynamic venture continuously, therefore, strives to get and retain the best talented employees for its organization. An empirical study revealed that about 80% of global business leaders believe the human resource management (HRM) as more important today than they were before, and 68 percent believe retaining talent is more important than acquiring new blood (Accenture, 2001). Fitz-enz, (1990); Sheridan (1992) explained that people often join a company or seek employment within a particular industry, because they find its culture appealing. Since people join an organization partly because they are attracted to the culture and structure, this is where retention management begins. Research has shown that employees' retention depend on organization culture and policies. Corporate culture is described as the invisible forces that encourage employees to exist in a business organization Employees want to work under the supervisor who has the ability to properly distribute the duties and responsibilities among the employees, who can give right direction and who can create creative way for doing the job (Risher and Stopper, 2002). Research finding suggests that leadership enhances organizational commitment (Allen 1996; Podsakoff et al., 1996). Therefore, it appears that leadership behavior has a positive influence on turnover intention. The absolute success of any business organization greatly depends on the employee-performance which can be enhanced only through proper training. Training is considered the most effective weapon to develop human resources that help them cope with changing environment (Goldstein, 1991; Wetland 2003). 43

5 Volume 7, Issue 9, March 2015 The variables selected for the study are recruitment and selection policy, training and development policy, compensation package, working environment, recognition and reward policy and leadership role. questionnaire was collected from the employees of middle and top level employees of both the companies. A few managers were interviewed to get further insights into retention practices. The questionnaire was simple, easily comprehendible and consisted of questions focused on various factors related to retention practices. The questionnaire was designed on 5 point likert scale (Strongly Agree to Strongly Disagree). To test the objectives 52 questions were incorporated into the questionnaire for the purpose of the study. The reliability (0.942) and validity (99.7%) of the questionnaire was found to be on a higher side. For theoretical framework information was gathered from the previous research articles, books, journals etc. Research Methodology Findings and Analysis For the purpose of measuring the objectives following methodology is adopted. The data collected through questionnaire was analyzed through SPSS software (Statistical Package for Social Studies version 17.0). To achieve the objectives of our study and testing of the hypothesis Factor analyses was applied in order to find out the most relevant factors affecting retention and to gain an insight into importance of the variables. A set of 12 factors were derived. Factor analysis is a tool to minimize data into some components that explain the common variables under one heading. It is a technique to identify groups or cluster of variables. Objectives of the study To analyze the current Retention practices of the automobile company. To find out major factors affecting employee retention. To measure the significance of these factors and its impact on employee retention Data Collection Primary data- Through structured questionnaire designed on the basis of objectives of the study. Secondary data Collected through various publications in management journals and internet which is restricted to the conceptual framework of the paper only. The final sample of 299 employees was selected by using Simple Random Sampling method. Employees from middle and top level were selected for the study. A structured self designed questionnaire was used. The data for the 44 Following table shows item wise mean and standard deviations.

6 Total Variance Explained The table namely 'Total Variance Explained' shows actual factors that were extracted. The % of variance column tells us how much of the total variability (in all of the variables together) can be accounted for by each of these questions (factors). It may be observed from the table that Q1 accounts for % of the variability in all 52 variables, and so on. In the present analysis we have followed most frequently used Kaiser's criterion to find number of principle components to be retained in the study. According to this criterion only those components should be retained whose latent root or Eigen values are greater than one Extraction Sums of Squared Loadings, shows factors that met cut-off criterion (extraction method). In this case, there are five factors with Eigen values greater than 1 and they all together cover a total of 71.85% of the variation. 45

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8 A rotation method gets factors that are as different and helps us interpret the factors by putting each variable primarily on one of the factors. Out of various methods the Varimax is the most common used rotation and is also used in the present study. The rotated solution gives the factor loadings for each individual variable in the dataset under study. Which are use to interpret the meaning of (i.e. make up names for) the different factors. The table 1.6 contains the information same as that of component matrix the only change is it obtained after the rotation. It may be noted that from this table that factor loadings less than 0.1 have not been displayed because these loadings are suppressed due to less importance. Based on these loadings it may be concluding that (from table 1.7):Factor 1that came into sight was HR Practices (talent retention practices) with factor load of and % of recruitment, job analysis, communication, career planning and development, compensation, job effectiveness and performance, fringe benefits, welfare facilities, reward structure and performance feedback. Factor 2 that came into sight was Working Environment (job satisfaction) with factor load of and % of conducive climate, innovation, creativity, job authority, effective working environment, empowerment, integrity, communication of policies and targets, and counseling, mentoring and interpersonal relationship. Factor 3 that came into sight was Recruitment and Selection with factor load of and % of variation. The factor is strongly loaded with variables like recruitment procedure, right match with the job, selection process, effective job organization, effective selection, career development and training. Factor 4 that came into sight was Leadership with factor load of and 5.498% of variation. The factor is strongly loaded with variables like job safety and standards, efficient supervision, team work, participative leadership style and conflict resolution process. Factor 5 that came into sight was Training and Development with factor load of and % of opportunity for training and development, need of training, effectiveness through training and development and policies for training and development. Factor 6 that came into sight was Compensation and Benefits (monetary and non monetary) with factor load of and % of variation. The factor is strongly loaded with variables like Salary and pay, reward for outstanding performance, compensation management and monetary and non monetary benefits. Factor 7 that came into sight was Employee Engagement with factor load of and % of variation. The factor is strongly loaded with variables like employee engagement, freeness to voice opinion, communication and level of engagement. Factor 8 that came into sight was Career Planning and Development with factor load of and % of opportunities for further studies, retention strategies, policies for career planning and development and management support. Factor 9 that came into sight was Employee counseling and mentoring with factor load of and % of effective selection, mentoring system, conflict resolution, problem solving and counseling. Factor 10 that came into sight was Healthy working relationship with factor load of and % of interrelationship, trust among the subordinates and colleagues, discipline, flexible rules and regulations. Factor 11 that came into sight was Job Security with factor load of and % of variation. The factor is strongly loaded with variables like stable job, job security and effective selection. Factor 12 that came into sight was Flexible rules and regulations with factor load of and % of standards of discipline, rules of discipline, policies for safety and health. 47

9 Volume 7, Issue 9, March 2015 Interpretation and Conclusion The factor analysis was applied on the questionnaire to churn out some factors that are of enormous consideration in Employee Retention. Factor Extraction and is also used in the present study. The rotated solution gives the factor loadings for each individual variable in the dataset under study. Which are use to interpret the meaning of (i.e., make up names for) the different factors. The table contains the information same as that of component matrix the only change is it obtained after the rotation. It may be noted that from this table that factor loadings less than 0.2 have not been displayed because these loadings are suppressed due to less importance. The last table gives component transformation matrix. It contains the values of components that are computed on basis of factor loadings. The table namely 'Total variance explained' shows actual factors that were extracted. The eigen values associated with each factor gives amount of variance explained by a particular linear component. The % of variance column tells us how much of the total variability (in all of the variables together) can be accounted for by each of these questions (factors). It may be observed from the table that component 1 accounts for 34.02% of the variability in all 52 variables, and so on. Kaiser's criterion is most commonly used criterion for finding the number of principle components to be retained in the study; according to this criterion only those components should be retained whose latent root or Eigen values are greater than one. Extraction Sums of Squared Loadings, shows factors that met cut-off criterion (extraction method). In this case, there are twenty factors with Eigen values greater than 1 and they all together cover a total of 72% of the variation. Thus in totality 12 components or factors were extracted in the present analysis. References A rotation method gets factors that are as different from each other as possible and helps us interpret the factors by putting each variable primarily on one of the factors. Out of various methods the Varimax is the most common used rotation Accenture, 2001, The high performance workforce: separating the digital economy's winners from losers. The Battle for Retention Accenture's Study, pp Thus we can conclude that Recruitment and Selection norms, Training and development, Compensation, healthy working Environment, recognition and rewards and strong leadership are all important in the decision of an employee to retain and should be taken care of at the time of formulating HR policies (Talent retention practices) followed in any organization. All the factors are important for an employee and dissatisfaction to any of them may affect his retention in the organization and should be taken care off. A blend of all these variables should be considered while formulation the policies of the company.

10 Albrecht, S. L. & Andreetta, M. (2011). 'The Influence of empowering leadership, empowerment and engagement on affective commitment and turnover intentions in community health service workers: Test of a Model', 24(3). Allen, N., 1996, Effective continuance and normative commitment to the organization: an examination of construct validity. Journal of Vocational Behavior 49(3), pp Arjit Bose (2011). 'Exit Interview A Tool to Reduce Employee Turnover'. HRM Review IUP Publications, April, Dr B K Tripathi (2010). 'Faculty Retention A Tool for Winning Competitive Edge', Technia Journal of Management Studies, 5(2), Fitzenz, J., 1990, Getting and keeping good employees, Personnel 67(8), pp Get Les Mckeown's ( ). Retain top employees, published in HBR series, 32. Greer, R Charles (2008). Strategic Human Resource Management, A general Managerial Approach, Pearson, Huselid, M. A (1995). 'The Impact of Human Resource Management Practices on Turnover, Productivity, and Corporate Financial Performance'. The Academy of Management Journal, 38(3), Kaiser, Kate and Stephan Hawk (2001). An Empirical Study on the Recruitment and Retention of Personnel ([Paper presented at the Decision Sciences Institute 32nd Annual Meeting]. Kirti Naik, Freelance Consultant & Trainer, IIM-A, Ex GMIPCL,(2011) 'Philosophy of Motivation A Strategy to Retain Manpower',pulished in the book (icfai press) Motivation as a Retention Strategy,3035. M D Verma & Sujata Nagaraj (2011). 'Work Life Balance: A Tool for Managing and Retaining Talents, Indian Journal of Training and Development, xxxx1 (July to September) 3, Mohammad A. Ashraf, M.H.R Joarder, R.A.Masum (2008), Human Resource Retention Practices: From Employees Perspective, Integritas Journal of Management Business, Vol 1, No.2, pg Paul Michelman ( ).'Why Retention Should Become a Core Strategy Now', Harvard Business Review, Retaining Your Best People, Podsakoff, P.M., S.B. MacKenzie and W.H.Bommer, 1996, Transformational leader behaviors and substitutes for leadership as determinants of employee satisfaction, commitment, trust and organizational citizenship behaviors, Journal of Management 22, pp Porter, M.V. 2001, The bottom line is employee compensation, Association Management 53(4), pp Priyanka Rawal (2011).'Employee Retention An Art of Keeping the People Who keeps you in Business'. HRM Review IUP Publications, (April). Risher, W., and W.G. Stopper, 2002, Corporate Sponsor Forum, Human Resources Planning 25(1), pp Sheridan, J.E. 1992, Organizational culture and employee retention, Academy of Management Journal 35(5), pp Timothy Butler and James Waldroop (1999). 'Job Sculpting: The Art of Retaining Your Best People', Harvard Business Review, Finding and Keeping Best People, V V Ramani and Usha N Raghunandan (2008). Managing Attrition Level in Organization, published in edited book by Icfai University press, Motivation as a Retention Strategy, Wetland, D. 2003, The strategic training of employees model: balancing organizational constraints and training content, S.A.M. Advanced Management Journal Winter, Cincinnati 49